With economy stalled, Dow falls 17.29


October 02, 1992|By Bloomberg Business News

NEW YORK -- Stocks closed lower yesterday as investors focused on signs of a stalled economic recovery rather than on a rally in bonds.

Yesterday's performance could spell trouble for equities, analysts said, because it suggests that investors need evidence of rebounding corporate profits, not just lower rates on alternative investments, to bid up stock prices.

The Dow Jones industrial average fell 17.29, to 3,254.37. The decline was led by International Paper, Minnesota Mining & Manufacturing, and Aluminum Co. of America. Computer-driven sell orders were responsible for much of yesterday's decline.

The Standard & Poor's 500 stocks fell 1.51, to 416.29, and the NASDAQ Composite dropped 4.94, to 578.33. Decliners led advancers by 9 to 5 among stocks on the New York Stock Exchange. Trading was active, with about 204 million shares changing hands on the Big Board.

"Taken at face value, it's become a much more earnings-driven market," said Ricky Harrington, director of investment policy at Marion Bass Securities. "When you reach the point where interest rates don't have an effect, you've got a lot of room for disappointment."

This is because stocks are trading at roughly twice their historical price/earnings ratios of about 28 for the Dow industrials and 27 for the S&P industrials, Mr. Harrington said.

Yesterday, the National Association of Purchasing Managers said its barometer of industrial output slid in September to the lowest level since the beginning of 1992.

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